MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Banks and Banking

By: Representative Fleming

AN ACT TO AMEND SECTION 75-67-403, MISSISSIPPI CODE OF 1972, TO AUTHORIZE A TITLE PLEDGE LENDER TO ENCUMBER THE TITLE AS PART OF THE TITLE PLEDGE TRANSACTION BY PERFECTING ITS SECURITY INTEREST IN THE TITLED PROPERTY; TO DEFINE THE TERM "RECORDS/DOCUMENTS" FOR THE PURPOSES OF THE TITLE PLEDGE ACT; TO AMEND SECTION 75-67-405, MISSISSIPPI CODE OF 1972, TO DIRECT THE COMMISSIONER OF BANKING AND CONSUMER FINANCE TO ENSURE THAT ALL TITLE PLEDGE TRANSACTION FORMS ARE WRITTEN IN CLEAR, CONCISE AND NONTECHNICAL LANGUAGE THAT CAN BE READILY UNDERSTOOD BY LAYPERSONS, AND THAT THE PROVISIONS OF THE TITLE PLEDGE AGREEMENT ON THE TRANSACTION FORMS ARE IN A FORMAT THAT IS EASILY READABLE; TO REQUIRE CERTAIN INFORMATION ON THE TRANSACTION FORMS TO BE PROMINENTLY DISPLAYED IN RED COLOR, WITH A BOLDED FONT AND A LETTER SIZE THAT IS SIGNIFICANTLY LARGER THAN OTHER PROVISIONS ON THE FORM; TO REQUIRE THE TRANSACTION FORMS TO CONTAIN LANGUAGE NEAR THE CENTER OF THE FORM IN RED COLOR, WITH A BOLDED FONT AND THE LARGEST LETTER SIZE USED ON THE FORM, WARNING THE PLEDGOR THAT IF HE DOES NOT REPAY THE FULL AMOUNT THAT HE OWES WITHIN THE TIME ALLOWED, HE WILL RISK LOSING THE OWNERSHIP OF HIS CAR; TO AMEND SECTION 75-67-409, MISSISSIPPI CODE OF 1972, TO REQUIRE TITLE PLEDGE LENDERS TO MAINTAIN RECORDS CONTAINING A COMPLETE PAYMENT HISTORY OF EACH CUSTOMER; TO AMEND SECTION 75-67-411, MISSISSIPPI CODE OF 1972, TO AUTHORIZE A PLEDGOR IN A TITLE PLEDGE AGREEMENT TO REDEEM THE PLEDGED PROPERTY WITHIN 72 HOURS AFTER THE TITLE PLEDGE LENDER HAS TAKEN POSSESSION OF THE PROPERTY; TO PROVIDE THAT IF THE LENDER SELLS THE PROPERTY AFTER THE 72-HOUR PERIOD, THE LENDER SHALL RETURN TO THE PLEDGOR ANY AMOUNT RECEIVED FROM THE SALE ABOVE THE AMOUNT NEEDED TO REDEEM THE PROPERTY; TO AMEND SECTION 75-67-413, MISSISSIPPI CODE OF 1972, TO REDUCE THE AMOUNT OF THE TITLE PLEDGE SERVICE CHARGE FROM 25% TO 16% PER MONTH; TO REQUIRE A PLEDGOR TO REDUCE THE PRINCIPAL AMOUNT FINANCED BY AT LEAST 10% BEGINNING WITH THE FIRST EXTENSION OR CONTINUATION, RATHER THAN BEGINNING WITH THE THIRD; TO PROVIDE THAT ANY ADDITIONAL PAYMENT OF FUNDS ON THE SAME PLEDGED PROPERTY MUST BE EVIDENCED BY A SEPARATE TITLE PLEDGE AGREEMENT; TO PROHIBIT A TITLE PLEDGE LENDER FROM ADVANCING FUNDS TO A PLEDGOR TO PAY OFF AN EXISTING TITLE PLEDGE AGREEMENT; TO AMEND SECTION 75-67-419, MISSISSIPPI CODE OF 1972, TO REVISE THE FEE FOR A TITLE PLEDGE LENDER LICENSE; TO AMEND SECTION 75-67-421, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT THE INITIAL APPLICATION AND BOND FOR A TITLE PLEDGE LENDER LICENSE SHALL BE FILED WITH THE COMMISSIONER OF BANKING, INSTEAD OF THE LOCAL AUTHORITIES; TO REQUIRE THE DEPARTMENT OF BANKING AND CONSUMER FINANCE TO CHECK WITH LOCAL LAW ENFORCEMENT AGENCIES IN THE COUNTY IN WHICH THE TITLE PLEDGE OFFICE IS TO BE LOCATED TO HELP DETERMINE THE SUITABILITY OF THE APPLICANT TO RECEIVE A LICENSE; TO AMEND SECTION 75-67-435, MISSISSIPPI CODE OF 1972, TO AUTHORIZE THE COMMISSIONER OF BANKING TO CHARGE TITLE PLEDGE LICENSEES AN EXAMINATION FEE; TO CREATE A NEW CODE SECTION TO BE CODIFIED WITHIN ARTICLE 9 OF CHAPTER 67 OF TITLE 75, MISSISSIPPI CODE OF 1972, TO PROHIBIT LICENSEES UNDER THE TITLE PLEDGE ACT FROM ADVERTISING, DISPLAYING OR PUBLISHING ANY STATEMENT OR REPRESENTATION THAT IS FALSE, MISLEADING OR DECEPTIVE; TO CREATE A NEW CODE SECTION TO BE CODIFIED WITHIN ARTICLE 9 OF CHAPTER 67 OF TITLE 75, MISSISSIPPI CODE OF 1972, TO AUTHORIZE THE COMMISSIONER OF BANKING TO EXAMINE PERSONS REASONABLY SUSPECTED OF CONDUCTING BUSINESS WHICH REQUIRES A LICENSE UNDER THE TITLE PLEDGE LOAN ACT; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 75-67-403, Mississippi Code of 1972, is amended as follows:

75-67-403. The following words and phrases shall have the following meanings:

(a) "Appropriate law enforcement agency" means the sheriff of each county in which the title pledge lender maintains an office, or the police chief of the municipality or law enforcement officers of the Department of Public Safety in which the title pledge lender maintains an office.

(b) "Attorney General" means the Attorney General of the State of Mississippi.

(c) "Commissioner" means the Commissioner of Banking and Consumer Finance of the State of Mississippi, or his designee, as the designated official for the purpose of enforcing this article.

(d) "Identification" means a government issued photographic identification.

(e) "Person" means an individual, partnership, corporation, joint venture, trust, association or other legal entity.

(f) "Pledged property" means any personal property certificate of title that is deposited with a title pledge lender in the course of the title pledge lender's business and is the subject of a title pledge agreement.

(g) "Pledgor" means the person to whom the property is titled.

(h) "Title pledge agreement" means a thirty-day written agreement whereby a title pledge lender agrees to make a loan of money to a pledgor, and the pledgor agrees to give the title pledge lender a security interest in unencumbered titled personal property owned by the pledgor. The pledgor shall agree that the title pledge lender keep possession of the certificate of title. The pledgor shall have the exclusive right to redeem the certificate of title by repaying the loan of money in full and by complying with the title pledge agreement. When the certificate of title is redeemed, the title pledge lender shall release the security interest in the titled personal property and return the personal property certificate of title to the pledgor. The title pledge agreement shall provide that upon failure by the pledgor to redeem the certificate of title at the end of the original thirty-day agreement period, or at the end of any extension(s) thereof, the title pledge lender shall be allowed to take possession of the titled personal property. The title pledge agreement shall contain a power of attorney which authorizes the title pledge lender to transfer title to the pledged property from the pledgor to the title pledge lender upon failure to redeem the pledged property on or before the maturity date of the title pledge agreement, or any extension thereof. The title pledge lender shall take physical possession of the certificate of title for the entire length of the title pledge agreement, but shall not be required to take physical possession of the titled personal property at any time. A title pledge lender may only take unencumbered certificates of title for pledge, but may encumber the title as part of the title pledge transaction by perfecting its security interest in the titled property.

(i) "Title pledge lender" means any person engaged in the business of making title pledge agreements with pledgors; provided, however, that the following are exempt from the definition of "title pledge lender" and from the provisions of this article: any bank which is regulated by the Department of Banking and Consumer Finance, the Comptroller of the Currency of the United States, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System or any other federal or state authority and all affiliates of such bank, and additionally any bank or savings and loan association whose deposits or accounts are eligible for insurance by the Bank Insurance Fund or the Savings Association Insurance Fund or other fund administered by the Federal Deposit Insurance Corporation or any successor thereto, and all affiliates of such banks and savings and loan associations, any state or federally chartered credit union and finance company subject to licensing and regulation by the Department of Banking and Consumer Finance.

(j) "Title pledge office" means the location at which, or premises in which, a title pledge lender regularly conducts business. No business other than title pledge business shall be conducted at a title pledge office.

(k) "Title pledge service charge" means a charge for investigating the title, appraising the titled personal property to which the pledged property relates, documenting and closing the title pledge agreement transaction, making required reports to appropriate law enforcement officials, and for all of the services provided by the title pledge lender.

(l) "Title pledge transaction form" means the instrument on which a title pledge lender records title pledge agreements pursuant to this article.

(m) "Titled personal property" means any personal property the ownership of which is evidenced and delineated by a state-issued certificate of title.

(n) "Records" or "documents" means any item in hard copy or produced in a format of storage commonly described as electronic, imaged, magnetic, microphotographic or otherwise, and any reproduction so made shall have the same force and effect as the original thereof and be admitted in evidence equally with the original.

SECTION 2. Section 75-67-405, Mississippi Code of 1972, is amended as follows:

75-67-405. (1) At the time the title pledge lender enters into each title pledge agreement, the title pledge lender shall complete a consecutively numbered title pledge transaction form for such transaction, and the pledgor shall sign the completed form. The commissioner shall approve the design and format of the title pledge transaction form, which shall elicit the information required under this section. The commissioner shall ensure that all title pledge transaction forms are written in clear, concise and nontechnical language that can be readily understood by laypersons, and that the provisions of the title pledge agreement on the transaction forms are in a format that is easily readable. In completing the title pledge transaction form, the title pledge lender shall record the following information, which shall be typed or written indelibly and legibly in English:

(a) The make, model and year of the titled personal property to which the pledged property relates.

(b) The vehicle identification number, or other comparable identification number, along with the license plate number, if applicable, of the titled personal property to which the pledged property relates.

(c) The name, address, date of birth, physical description, social security number of the pledgor and one (1) photo identification.

(d) The date of the transaction.

(e) The identification number and the type of identification (including the issuing agency) accepted from the pledgor.

(f) The amount of money advanced, which shall be designated as the "amount financed."

(g) The maturity date of the title pledge agreement, which shall be thirty (30) days after the date of the transaction.

(h) The total title pledge service charge payable on the maturity date, designated as the "finance charge."

(i) The total amount (amount financed plus finance charge) which must be paid to redeem the pledged property on the maturity date, designated as the "total of payments."

(j) The annual percentage rate, computed in accordance with the regulations adopted by the Federal Reserve Board pursuant to the Federal Truth-in-Lending Act.

(2) The information required in paragraphs (f) through (j) of subsection (1) shall be prominently displayed in red color on the form, with a bolded font and a letter size that is significantly larger than other provisions on the form.

(3) In addition to the information required in subsections (1) and (2), the form shall contain the following language near the center of the form, which shall be in red color, with a bolded font and the largest letter size used on the form: "WARNING: IF YOU DO NOT REPAY THE FULL AMOUNT THAT YOU OWE WITHIN THE TIME ALLOWED, YOU WILL RISK LOSING THE OWNERSHIP OF YOUR CAR (OR OTHER PROPERTY PLEDGED)."

SECTION 3. Section 75-67-409, Mississippi Code of 1972, is amended as follows:

75-67-409. (1) The pledgor shall sign a statement verifying that the pledgor is the rightful owner of the pledged property and is entitled to pledge it. The pledgor shall receive an exact copy of the title pledge agreement which shall be signed by the title pledge lender or any employee of the title pledge lender.

(2) The title pledge lender shall maintain a record of all transactions of pledged property on the premises for a period of two (2) years. A title pledge lender upon request shall provide to the appropriate law enforcement agency a complete record of all transactions. These records shall be a correct copy of the entries made of the title pledge transaction, except as to the amount of cash advanced for the pledged property and the monthly title pledge charge.

(3) The title pledge lender shall maintain records that contain a complete payment history of each customer evidencing all principal payments, service charge and/or other charges. Those records also shall reflect any unpaid principal balance as well as a payoff balance that includes the accrued service charges.

SECTION 4. Section 75-67-411, Mississippi Code of 1972, is amended as follows:

75-67-411. (1) A pledgor shall have no obligation to redeem pledged property or make any payment on a title pledge transaction. Upon the pledgor's failure to redeem the pledged property on or before the maturity date of the title pledge agreement or any extension or continuation thereof, the title pledge lender has the right to take possession of the titled personal property and to exercise a power of attorney to transfer title to the pledged property. In taking possession, the title pledge lender or his agent may proceed without judicial process if this can be done without breach of the peace; or, if necessary, may proceed by action to obtain judicial process.

(2) If, within thirty (30) days after the maturity date, the pledgor redeems the pledged property by paying all outstanding principal, interest and other customary fees, the pledgor shall be given possession of the titled personal property and the pledged property without further charge.

(3) If the pledgor fails to redeem the pledged property during the thirty-day period provided in subsection (2) of this section, then the pledgor shall thereby forfeit all right, title and interest in and to the titled personal property and the pledged property to the title pledge lender who shall thereby acquire an absolute right of title and ownership to the titled personal property. The title pledge lender shall then have the sole right and authority to sell or dispose of the titled personal property.

(4) Notwithstanding anything in the preceding subsections of this section, the pledgor shall have seventy-two (72) hours after the title pledge lender has taken possession of the titled personal property to redeem the property by paying the amount of the unpaid principal balance, the delinquent service charge and the actual cost of the repossession. If the title pledge lender sells the titled personal property after the seventy-two-hour period, the title pledge lender shall return to the pledgor any amount received from the sale above the amount of the unpaid principal balance, the delinquent service charge and the actual cost of the repossession.

SECTION 5. Section 75-67-413, Mississippi Code of 1972, is amended as follows:

75-67-413. (1) A title pledge lender may contract for and receive a title pledge service charge in lieu of interest or other charges for all services, expenses, cost and losses of every nature not to exceed sixteen percent (16%) of the principal amount, per month, advanced in the title pledge transaction.

(2) Any interest, charge or fees contracted for or received, directly or indirectly, in excess of the amount permitted under subsection (1) of this section shall be uncollectible and the title pledge transaction shall be void. The title pledge service charge allowed under subsection (1) of this section shall be deemed earned, due and owing as of the date of the title pledge transaction and a like sum shall be deemed earned, due and owing on the thirty-first day from the date of the transaction and on every thirtieth day thereafter.

(3) By agreement of the parties, the maturity date of the title pledge transaction may be extended or continued for thirty-day periods, provided that the service charges as specified in subsection (1) are not exceeded for any extensions. All extensions or continuations of the title pledge transaction shall be evidenced in writing. No accrued interest or service charge shall be capitalized or added to the original principal of the title pledge transaction during any extension or continuation. Beginning with the first extension or continuation, the principal amount financed shall be reduced by at least ten percent (10%) of the original principal amount for each successive extension or continuation. Failure by the pledgor to pay at least ten percent (10%) of the original principal amount of the title pledge transaction at the maturity date of each such successive extension or continuation shall cause the remaining principal and any service charges or fees to become immediately due and payable.

(4) Any additional payment of funds on the same pledged property must be evidenced by a separate title pledge agreement. A title pledge lender shall not advance funds to a pledgor to pay off an existing title pledge agreement.

SECTION 6. Section 75-67-419, Mississippi Code of 1972, is amended as follows:

75-67-419. (1) A person may not engage in business as a title pledge lender or otherwise portray himself as a title pledge lender unless the person has a valid license authorizing engagement in the business. A separate license is required for each place of business under this article. The commissioner may issue more than one (1) license to a person if that person complies with this article for each license. A new license or application to transfer an existing license is required upon a change, directly or beneficially, in the ownership of any licensed title pledge office and an application shall be made to the commissioner in accordance with this article.

(2) When a licensee wishes to move a title pledge office to another location, the licensee shall give thirty (30) days prior written notice to the commissioner who shall amend the license accordingly.

(3) Each license shall remain in full force and effect until relinquished, suspended, revoked or expired. With each initial application for a license, the applicant shall pay the commissioner at the time of making the application a license fee of Seven Hundred Fifty Dollars ($750.00), and on or before June 1 of each year thereafter, an annual renewal fee of Four Hundred Seventy-five Dollars ($475.00). If the annual fee remains unpaid thirty (30) days after June 1, the license shall thereupon expire, but not before June 30 of any year for which the annual fee has been paid. If any person engages in business as provided for in this article without paying the license fee provided for in this article before commencing business or before the expiration of such person's current license, as the case may be, then the person shall be liable for the full amount of the license fee, plus a penalty in an amount not to exceed Twenty-five Dollars ($25.00) for each day that the person has engaged in the business without a license or after the expiration of a license. All licensing fees and penalties shall be paid into the Consumer Finance Fund of the Department of Banking and Consumer Finance.

(4) Notwithstanding other provisions of this article, the commissioner may issue a temporary license authorizing the operation of a title pledge office on the receipt of an application to transfer a license from one person to another or on the receipt of an application for a license involving principals and owners that are substantially identical to those of an existing licensed title pledge office. The temporary license is effective until the permanent license is issued or denied.

(5) Notwithstanding other provisions of this article, neither a new license nor an application to transfer an existing license shall be required upon any change, directly or beneficially, in the ownership of any licensed title pledge office incorporated under the laws of this state or any other state so long as the licensee continues to operate as a corporation doing a title pledge business under the license. The commissioner may, however, require the licensee to provide such information as he deems reasonable and appropriate concerning the officer and directors of the corporation and persons owning in excess of twenty-five percent (25%) of the outstanding shares of the corporation.

SECTION 7. Section 75-67-421, Mississippi Code of 1972, is amended as follows:

75-67-421. (1) To be eligible for a title pledge lender license, an applicant shall:

(a) Operate lawfully and fairly within the purposes of this article;

(b) Not have been convicted of a felony in the last ten (10) years or be active as a beneficial owner for someone who has been convicted of a felony in the last ten (10) years;

(c) File with the commissioner a bond with good security in the penal sum of One Hundred Thousand Dollars ($100,000.00), payable to the State of Mississippi for the faithful performance by the licensee of the duties and obligations pertaining to the business so licensed and the prompt payment of any judgment which may be recovered against the licensee on account of damages or other claim arising directly or collaterally from any violation of the provisions of this article; such bond shall not be valid until it is approved by the commissioner; such applicant may file, in lieu thereof, cash, a certificate of deposit, or government bonds in the amount of Ten Thousand Dollars ($10,000.00), the deposit of which shall be filed with the commissioner and is subject to the same terms and conditions as are provided for in the surety bond required herein; any interest or earnings on such deposits are payable to the depositor.

(d) File with the commissioner an application accompanied by a set of fingerprints from any local law enforcement agency, * * * and the initial license fee required in this article. In order to determine the applicant's suitability for license, the commissioner shall forward the fingerprints to the Department of Public Safety; and if no disqualifying record is identified at the state level, the fingerprints shall be forwarded by the Department of Public Safety to the FBI for a national criminal history record check.

(2) Upon the filing of an application in a form prescribed by the commissioner, accompanied by the fee and documents required in this article, the department shall investigate to ascertain whether the qualifications prescribed by this article have been satisfied. The department shall check with local law enforcement agencies in the county in which the title pledge office is to be located to help determine the suitability of the applicant to receive a license. If the commissioner finds that the qualifications have been satisfied and, if he approves the documents so filed by the applicant, he shall issue to the applicant a license to engage in the business of title pledge lending in this state.

(3) Complete and file with the commissioner an annual renewal application accompanied by the renewal fee required in this article.

(4) The license shall be kept conspicuously posted in the place of business of the licensee.

SECTION 8. Section 75-67-435, Mississippi Code of 1972, is amended as follows:

75-67-435. (1) The Commissioner of Banking and Consumer Finance shall develop and provide any necessary forms to carry out the provisions of this article.

(2) The department may adopt reasonable administrative regulations, not inconsistent with law, for the enforcement of this article.

(3) To assure compliance with the provision of this article, the department may examine the books and records of any licensee without notice during normal business hours. The commissioner may charge the licensee an examination fee in an amount not less than Two Hundred Dollars ($200.00) nor more than Three Hundred Dollars ($300.00) per examination of each office or location within the State of Mississippi, plus any actual expenses incurred while examining the licensee's records or books that are located outside the State of Mississippi. However, in no event shall a licensee be examined more than once in a two-year period unless for cause shown based upon consumer complaint and/or other exigent reasons as determined by the commissioner.

SECTION 9. The following section shall be codified as a separate code section within Article 9 of Chapter 67 of Title 75, Mississippi Code of 1972:

75-67-___. A licensee shall not advertise, display or publish, or permit to be advertised, displayed or published, in any manner whatsoever, any statement or representation that is false, misleading or deceptive.

SECTION 10. The following section shall be codified as a separate code section within Article 9 of Chapter 67 of Title 75, Mississippi Code of 1972:

75-67-__. The commissioner, or his duly authorized representative, for the purpose of discovering violations of this article and for the purpose of determining whether persons are subject to the provisions of this article, may examine persons licensed under this article and persons reasonably suspected by the commissioner of conducting business that requires a license under this article, including all relevant books, records and papers employed by those persons in the transaction of their business, and may summon witnesses and examine them under oath concerning matters relating to the business of those persons, or such other matters as may be relevant to the discovery of violations of this article, including without limitation the conduct of business without a license as required under this article.

SECTION 11. This act shall take effect and be in force from and after July 1, 2000.